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From:

"Dan Primack"

Name:

Dan Primack

Email Address:

Dan_Primack@fortune.chtah.com

Subject:

Term Sheet -- Thursday, November 4

Date:

04-11-2010 14:28:50
Message

Fortune Finance Street Sweep Term Sheet Economics Tech Wall Street Washington

The Term Sheet by Katie Benner

Thursday -- November 4, 2010
Email Katie | Follow Dan on Twitter | Subscribe

Icahn abides
BHP-Potash edged out MGM for deal of the day, but it was a tough call. While Potash of
Saskatchewan provides an essential ingredient in the global food chain, MGM is an essential
piece of the entertainment machine that brought us Hot Tub Time Machine. But what makes
MGM truly notable is Carl Icahn. Sure, hes gotten friendlier and fuzzier over the years, posing
for silly Fortune photo spreads and introducing the world to Susan Gordon, his Miss Money
Penny, but hes no less clever or ruthless. As a person familiar with Mr. Icahn told me, Carl
loved the game when he could make money and everyone else made zero. Then things changed
and he remade himself as an activist who makes money so everyone else can, too. Its not as
fun now, but he still likes it. And hell still win.
With the MGM pre-packaged bankruptcy, Icahn didnt get the MGM-Lionsgate merger that he
wanted. Instead he got a seat on MGMs board, prevented MGM from buying Spyglass films that
he deemed overpriced (maybe he hated the Sixth Sense?), and influenced the corporate
governance changes in the agreement. Most importantly, he left the door open for a future
merger with Lionsgate, of which he is the largest shareholder, and as a bondholder in MGM he
did pretty well.
True, Lionsgate is suing Icahn and accusing him playing a "double game." Among other things,
the lawsuit says: to ensure that Lionsgate did not pursue a 'delusional' MGM transaction, Icahn
was quietly amassing a huge position in MGM debt with the undisclosed intention of reaping
profits from both sides in an eventual merger." One person I spoke with yesterday isnt so sure

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this lawsuit will work out for the movie studio or stop a merger down the road. As for Icahn,
when youre the most ruthless dealmaker on the planet, you have to break a few eggs to get
the omelet made.
** A reader points out that theres an interesting bidding war going on between Gores
Group and Marlin Equity Partners for Phoenix Technologies (Nasdaq: PTEC). Marlin kicked off
the acquisition talk in August with a $3.85 a share bid, which was countered by $4.05 bid from
Gores. Marlin matched the bid, so yesterday Gores bumped the price up to $4.20. On August
17, the stock was at $3.06, and has rallied on pace with the bidding war. Clearly people need to
deploy some capital. Keep in mind, Phoenix not only makes system software, it also offers
solutions for server infrastructure, a market that has exploded along with cloud computing.
*** Lots of private equity-backed companies suffered during the credit crisis, including
Apollos Linensn Things, KKRs Masonite International, MGM (backed by Quadrangle,
Providence, and TPG), Sam Zells Tribune mess. But those are just the headlines. PE-backed
companies actually weathered the credit crisis as well as those companies that werent bought
out during the boom, according to a new report from Moodys.
**** Between 2000 and 2006, private equity investments in emerging markets more than
tripled, according to a Boston Consulting survey.
***** Al Pacino may eat Michael Douglas actor-who-embodies-Wall-Street crown for lunch
when he stars in Arbitrage a thriller about a hedge fund manager who committed fraud then
tries to sell the firm to a bank. I have my doubts, though. Will it be 2 hours of Pacino screaming
things like: Thats only 100 bps over Libor! Im keeping expectations low.
****** Finally, a good back and forth with a reader who was one of many accusing me of
political bias yesterday (some accused me of shilling for the right, others of being a Pelosi-loving
Dem). But Tom decided that I was bashing the Tea Party. While the other detractors got my
political leanings wrong, Tom was right in that Im not a Tea Party supporter. (I confess to
perhaps retweeting something about Tea Party candidates looking like the bar scene in Star
Wars) But Toms comments about the Tea people were all very thoughtful and so I wanted to
share a few here.
I think it a mistake to denigrate or underestimate the valid opinions that the Tea Party is
reflecting, which seems to be no more complicated than "a 10% of GDP budget deficit and
40%-going-to-100% debt/GDP ratios are unacceptable.
The TP'iers are so serious about poor Gov't spend decisions that they would not be expected to
vote for another TARP, thereby letting the Wall Street crowd go through bankruptcy court next
time (as they of course prefer everyone to do except for themselves). The supposition was that
for this reason, the TP is anathema to Wall Street.
Finally: The Politician's who voted for TARP got slaughtered, which really tends to focus the
mind. Will there really be another bailout? If not, what happens the next time Wall Street fails
on their core-mission of managing financial risk?....and they will fail again.
Tom. Thanks for writing and making a registered independent, socially uber liberal, fiscally
moderate, Mennonite/Baptist-raised New Englander think again about the changes afoot in the
Republican party.
Ill be filling in for Dan while hes away on paternity leave. Feel free to ping him to say
congratulations, and please send all work related emails (news, tips, scoops, corrections) to me
at Katie_benner@fortune.com

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5things you should read @Fortune.com

Duff MacDonald: Why Steve Black is leaving the house of Dimon

Michael Copeland:No Facebook phone, but Facebook on every phone

Katie Benner: Michael Dell is winning on Wall Street

Nin-Hai Tseng: Why the Republicans may not get much done

Crash of the Titan: The rise and fall of Stan O'Neal

The Big Deal

BHP Billiton's $38.6 billion/$130 a share bid for Potash Corp. of Saskatchewan was shot
down by the Canadian government, which said that the mining giant couldnt prove the
acquisition would generate a net benefit to Canada. The decision comes about three months
after BHP made its initial hostile all-cash takeover bid and after weeks of nationalistic posturing
by Saskatchewan Premier Brad Wall and a host of Canadians who did not want to see a
national, fertilizer-making treasure sold to an Australian company.
No matter what happens with BHP, Potash may still be an appealing acquisition. The Canadian
company controls about a fifth of the worlds potash, which we need to grow food; and it has
been a stock market star. While still well below its all-time high price near $230, it has rallied
from about $50 at the end of 2008 to nearly $145 a share today. China's Sinochem showed a
fleeting interest in Potash, Russian fertilizer company Phosagro wants to buy a stake, and the
Saskatchewan-based Indigenous Potash Group has raised $25 billion from Canadian pension
funds and foreign investors to rival BHPs bid.
More importantly, its doubtful that this is the last well see of protectionism, which is gripping
countries around the globe as they deal with the specters of trade conundrums, currency
devaluations, and the churnings of a global economy in the early stages of a recovery

VC Deals
AcousticEye, a company in the Netherlands that makes non-invasive, acoustic-based testing
equipment, completed its Series B investment round with funding from Sequoia Capital. The
company has also increased its management and sales team, and has added a Sequoia Capital
representative to its board of directors. http://www.acousticeye.com/en-us/Index.asp
Vericare Management, a San Diego-based provider of geriatric health services, received a
venture debt financing from Velocity Financial Group for an undisclosed amount. This facility is
being used to finance a key, strategic acquisition. Vericare is backed by HLM Venture Partners,
Salix Ventures, Acacia Venture Partners, and Aetna Ventures. Velocity Financial is a specialty
finance company that offers private equity and venture-backed companies less dilutive, more
flexible forms of capital. www.vericare.com
Exclusively.In, an online retailer that sells Indian-style fashion, jewelry and home dcor,
announced a $2.8 million round of institutional and angel funding from Accel Partners India and
Helion Venture Partners. Exclusively.In brings luxury ethnic fashion and lifestyle products to the
US via the members-only, private-sale format characterized by companies such as Gilt Groupe
and Rue La La. Ashish Gupta of Helion Venture Partners and Prashanth Prakash of Accel
Partners India will join the companys board of directors.
Estately, a Seattle-based real estate search site, has raised $800,000 from angel investors
including 500 Startups, Founders Fund, Jeff Clavier, Founders Co-op, Geoff Entress and Naval
Ravikant, TechCrunch reports.The site works with a network of 200 real estate agents and
makes 20% of the commission when people purchase a home through one of Estatelys agents.

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Estately lists nearly 600,000 homes in Seattle, Portland, San Francisco, Sacramento, Los
Angeles, San Diego, Chicago, Long Island, Washington DC, Baltimore, and Atlanta.
http://www.estately.com
Neato Robotics, a Mountain View, CA-based maker of robotic vacuum cleaners, raised $3.7
million in new funding, reports the San Jose Business Journal. The funding was disclosed in a
regulatory filing and provided by five investors. It is part of a broader effort to raise about $14
million. While no previous investors were mentioned in the filing, the newspaper notes that
Menlo Park venture capital firm Noventi lists Neato Robotics as a portfolio company, and
Noventis founder and managing director Giacomo Marini is a director at Neato. Noventi partner
Pierluigi Zappacosta is also a director at Neato. http://www.neatorobotics.com/
Silverback completed a $11.5 seed funding round led by Austin Ventures, a Texas-based
venture capital and growth equity firm. www.austinventures.com
Red Foundry, a Chicago-based startup that develops mobile apps, raised $1.1 million in first
round funding. OCA Ventures and I2A Fund participated in the funding round.
www.redfoundry.com
Nexant, San Francisco-based provider of intelligent grid software and clean energy solutions,
completed a $50 million financing round after adding an investment from Symphony Technology
Group. www.nexant.com

Private Equity

Fushi Copperweld, a manufacturer of bi-metallic wire used in electrical, telecommunications,

and transportation, is being taken private by Hong Kong-based Abax Global Capital in a deal
priced at $11.50 per share in cash, a 26% premium to the company's closing price Wednesday.
Apax currently owns approximately 29.2% of Fushi. http://finance.yahoo.com/news/FushiCopperweld-Inc-prnews-1476136245.html?x=0&.v=1
Central Security Group, a Tulsa, OK-based security alarm company, received an investment
from Summit Partners. Terms of the deal were not disclosed. Central Security Group will use the
funding to expand its dealer network and grow its subscriber base. Sonya Tarnow Brown, a
principal at Summit Partners, will join the Central Security Group board of directors.
www.centralsecuritygroup.com
Snapper Hill Clinics, a healthcare provider, sold a 40% stake to TLG Capital, marking TLGs
first investment in Liberia, reports AltAssets. This is TLG's third healthcare deal since it was
founded in 2009. http://www.altassets.com/private-equity-news/article/nz19541.html
PETCO, a San Diego-based pet supplies retailer, is in the market to raise about $1.7 billion so
that it can pay a dividend to its private equity sponsors Leonard Green and TPG, reports PeHub.
The firms acquired PETCO in 2000 for $600 million deal.
Gulf Coast Energy Resources received a $250 million investment from Warburg Pincus, a
private equity firm in New York. Gulf Coast Energy Resources expects to acquire and explore
producing fields across the Gulf Coast of Texas and Louisiana. www.warburgpincus.com
Smile Brands will sell a majority interest to Welsh, Carson, Anderson & Stowe for an
undisclosed amount of money. The New York private equity firm will purchase a majority of its
position from Freeman Spogli & Co., who will remain a minority investor in the company. The
transaction is expected to close in December. www.welshcarson.com

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Oakley Capital Private Equity has acquired 84.4% of BDO Investment Management Limited
from its parent company BDO LLP. The deal values the subsidiary at $22.6 million. Financial
terms were not released. www.oakleycapital.com

IPOs
GM confirmed details about its upcoming IPO in a regulatory filing. The Detroit automaker plans
to sell 365 million shares at $26 to $29 each, making the offering worth about $10 billion at the
midpoint of its price range. Underwriters have the option to sell an additional 54.8 million
shares, and the company will also sell 60 million preferred shares for $3 billion. GMs biggest
shareholder, the Treasury Department, will sell about $7 billion worth of shares, paring its stake
down to 43%.
http://www.sec.gov/Archives/edgar/data/1467858/000119312510246019/ds1a.htm
General Growth Properties had its plan to exit from bankruptcy approved by US Bankruptcy
Judge Allan Gropper. The Chicago-based mall operator now plans to emerge from its 19-month
stint in bankruptcy and hold an initial public offering in December. When it exits Chapter 11,
General will split into two companies. The larger company will keep the General Growth name
and own 185 malls in the US. The smaller company will be called Howard Hughes Corp and own
General Growth's riskier assets. http://www.ggp.com
China Datang Corp, one of Chinas main power generators, plans to raise $1 billion by listing
its renewable energy unit in Hong Kong this year, the Wall Street Journal reports, citing people
familiar with the matter. It also says that China Hongqiao Group, a aluminum hydroxide
maker, is planning a $1.5 billion IPO. The report says that says JP Morgan Chase, UBS, Credit
Suisse, and Macquarie Group are handling the Datang deal; and that JP Morgan, ICBC
International, Bocom International, and BNP Paribas are handling the Hongqiao sale.
Horizon Technology Finance Corporation, which announced last Thursday an initial public
offering of 6,250,000 shares that priced at $16.00 per share, said that underwriters exercised
their option to purchase an additional 937,500 shares. Total net proceeds to the company
equaled $73.06 million with $19.94 million to selling stockholders. Horizon Technology is a
closed-end investment company that is externally managed by its investment advisor, Horizon
Technology Finance Management LLC. http://www.horizontechfinance.com/
CVC Asia Pacificplans to hold an initial public offering in March for Australia's PBL Media,
reports Reuters, in a deal that could value the company at over $5 billion. CVC would retain a
20% stake in PBL, owner of Nine Network and ACP Magazines, according to the report.
Dubai Investments Co. plans to sell 30% of its Masharie private equity unit to investors via
an initial public offering, Reuters reported. The IPO will launch in the first half of 2011.
www.dubaiinvestments.com

Exits
Whistler Blackcomb Holdings, a Canadian ski resort owned by Fortress Investment Group
subsidiary Intrawest, has filed a final Canadian prospectus for an initial public offering of 25
million shares at C$12.00 per share. The offering is scheduled to close November 9, 2010.
Following the IPO, Intrawest will hold approximately a 34% stake in Whistler. www.fortress.com
Zealand Pharma aims to raise up to $140 million in an initial public offering, Reuters reported.
The private equity-backed Danish biotech firm will offer nearly 9 million new shares priced
between 86 and 120 crowns ($16.20-$22.6). www.zealandpharma.com
ICICI Venture, an Indian private equity fund, sold its stake in biotech company RFCL to U.S.-

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based Avantor Performance Materials, Reuters reported. Avantor paid roughly $100 million for
the 85% stake in RFCL, which develops technology for the pharmaceutical and biotech
industries. RFCL is based in New Delhi. Avantor is owned by New York-based private equity firm
New Mountain Capital.

Other Deals
NetJets, the private jet company owned by Berkshire Hathaway, is buying Marquis Jet.
Financial terms were not disclosed. Marquis will become a NetJets subsidiary. www.netjets.com
Panasonic, a battery cell manufacturer based in Osaka, has invested $30 million in Tesla
Motors in a private stock placement priced at $21.15 per share. The electric car maker uses
Panasonic battery cells and has collaborated with the company to develop battery cells designed
specifically for electric vehicles. http://ir.teslamotors.com/releasedetail.cfm?ReleaseID=526928
Casey's General Stores rejected 7-Elevens $43-a-share and ended talks with the convenience
store company saying that the bid does not reflect its full value. 7-Eleven, which is owned by
Japan's Seven & I Holdings, originally made a $40 a share bid in early September, to beat out a
$38.30 bid by Canada's Alimentation Couche-Tard. Casey also plays to buy up to 44 Kabredlo's
convenience stores. http://www.caseys.com/
SAIC Motor, a Chinese automaker, may buy a stake in long-time partner General Motors,
which is preparing for an IPO this month, according to Reuters. The report says that SAIC is
may buy a stake of the Detroit automaker's more than $13 billion share sale. GM is also likely to
sell a $1.5 billion to $2 billion stake to a handful of sovereign wealth funds, Reuters says. SAIC
and GM recently signed a partnership agreement that stopped short of SAIC taking a minority
ownership stake in GM. http://www.saicmotor.com/
Lehman Brothers Holdings Inc., the remains of the investment bank that filed for
bankruptcy in September 2002, wants to modify the terms of its real estate investment vehicle
Archstone-Smith Trust in order to wipe an additional $237 million in debt from its books and
make Archstone more attractive to potential buyers, reports the Wall Street Journal. The paper
said that Archstone owns interests in about 430 apartment communities in the US and Europe.
Westfield Group, the Australian mall operator, plans to spin off a trust that owns stakes in 54
malls in an attempt to reverse its 17% share price decline since 2004, Bloomberg reports. The
separately listed real estate investment trust will seek to raise$3.5 billion. The move partially
reverses a merger that created the worlds biggest mall operator, according to the report.
Royal Bank of Scotland may sell a $6.4 billion project finance book to Japan's Mitsubishi UFJ
Financial, Reuters reports. During the financial crisis, RBS was bailed out by the British
government , and it has been selling assets to pay back that aid. Mitsubishi UFJ injected capital
into Morgan Stanley at the height of the crisis in exchange for about a 20% stake in the Wall
Street giant. http://www.rbs.com
Everon Technology Services, a company that provides IT support for small businesses, was
acquired by PlumChoice. Terms of the deal were not disclosed. Mike Cooch, president and
founder of Everon Technology Services, will join PlumChoice as a member of the executive team
and assume the role of vice president/general manager, Business Services. www.everonit.com
BigTent, a San Francisco-based platform for online parenting groups, was acquired by
Federated Media Publishing. The terms of the deal were not disclosed. The deal combines the 8
million parents who read FMs content and the millions that use BigTent to stay connected with
local school, community and shared-interest groups. Laney Whitcanack, the co-founder of

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BigTent, is now chief community officer at FM. http://www.bigtent.com

SurveyMonkey, a Menlo Park, CA-based provider of web-based surveys, has successfully
completed a $100 million senior debt financing. The financing was led by Bank of America Merrill
Lynch and SunTrust Robinson Humphrey, who acted as joint lead arrangers and joint book
managers. Other participating banks included JPMorgan Chase, Royal Bank of Canada, Webster
Bank, and Zions First National Bank. SurveyMonkey handles over 25 million online survey
responses per month, and expanded into telephone-based surveys when it acquired Precision
Polling. SurveyMonkey is privately held and its investors include Spectrum Equity Investors and
Bain Capital Ventures. www.surveymonkey.com
AdCare Health Systems, a Springfield, OH-based senior living and health care facility
management company, has secured a $5 million revolving line of credit from Gemino Healthcare
Finance, a specialty healthcare lender that provides senior debt financing to healthcare service
providers. The line will be used to support AdCare's working capital requirements.
www.adcarehealth.com
GainSpain, a company that makes low-power Wi-Fi chips, raised $5 million of an expected $20
million in equity, according to a filing with the SEC. www.gainspan.com
Chrysalis Music Group said it is discussing merger opportunities, according to The New York
Post, which names BMG Rights Management and the Warner Music Group among the list of
potential bidders.
Wal-Mart Stores, the world's largest retailer, joined the race to buy Indonesian retailer
Matahari's hypermarket business in a deal worth up to $1 billion, Reuters reported.
Swiss Reinsurance Company, the worlds second-largest reinsurer, is set to pay back its
$3.09 billion loan from Warren Buffett. SwissRe took the high interest loan from Buffetts
Berkshire Hathaway while it was reeling from losses on high risk assets.
http://www.swissre.com/

Firms & Funds

As we mentioned yesterday, Chicago-based GTCR hopes to raise a $3 billion buyout fund,
which already has a $100 million commitment from the Teachers Retirement System of Illinois.
The news was first reported by Becky Yerak at the Chicago Tribune, who also reports that the
private equity firm raised $2.8 billion in 2006 for its previous fund, and that private equity was
the Teachers Retirement Systems best-performing asset class in fiscal 2010, with a 19.01%
rate of return. .
KKR, the New York-based buyout firm, held a first close on $700 million for a China Growth
Equity fund the company said during its third quarter earnings call. This is KKRs first ever
country-specific fund. KKR also plans to raise a new global private equity fund sometime early
next year. www.kkr.com
Wellspring Capital Management, a New York private-equity firm, raised $1.2 billion for its
fifth and largest fund, according to Bloomberg. Wellspring Capital Partners will target middle
market transactions. Wellspring, founded in 1995, focuses mostly on the restaurant,
manufacturing, and distribution industries.
Harrier Hawk Management, a New York-based long/short hedge fund, plans to launch a
short US equity fund in January of next year, reports HFMWeek. The Harrier Hawk Four
Horsemen Fund is expected to raise $100 million and provide bearish exposure to US equities.

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The fund will have a $2 million investment minimum and a one-year lock-up. Goldman Sachs
and Fidelity Prime Services are the prime brokers. http://harriercap.com/
Asante, a London-based private equity placement group, was recently formed by former
partners at global fundraising specialist MVision, including Warren Hibbert and Fraser Van
Rensburg.Asante will work with private equity funds in both developed and emerging markets.
www.asantecapital.com
Cypress Lane Asia Fund is liquidating and will return money to investors by the end of
November, Bloomber reports. The fund was started by former Goldman Sachs trader Shafiq
Karmali just a little over a year ago and had $25 million of assets as of September, according to
the report. It lost almost 10 percent in the 14 months since its August 2009 inception,
Bloomberg said, citing a letter sent to investors.
First New York Securities, a proprietary trading firm, plans to launch a multi-strategy hedge
fund, reports Bloomberg. This is First New Yorks first fund, and it plans to begin raising money
in the beginning of 2011. First New York currently manages about $350 million and may hire as
many as 40 traders in the next six months, the report says. http://www.fnysllc.com/index.php
Impax Asset Management Group, based in London, has received subscriptions for an
additional 118 million euros of capital commitments to its second private equity fund, Impax
New Energy Investors II LP. www.impax.co.uk

Moving In, Up and On

Abu Dhabi Investment Authority, the sovereign wealth fund of Abu Dhabi, has named
James Kester to the post of chief investment officer for private equity, Reuters reported.
http://www.adia.ae/
Brad Weeks and James Hughes are moving to Courage Capital Management, a Nashville
hedge fund that also runs closed-end distressed funds. Both men previously worked at Ergates
Capital Management, a fund founded by Weeks in 2004. www.couragecap.com
David Sola is joining mid-market investment bank Houlihan Lokey as a managing director to
work with its deal-making team in London, reports the New York Times. According to the
newspaper, Sola was previously co-head of European M&A at UBS, a managing director at Arma
Partners, and worked at Softbank Europe Ventures.
Antnio Horta-Osrio has been named as new chief executive of Lloyds Banking Group
starting in March of 2011, and he will succeed Eric Daniels. Previously he led Santander UK.
Daniels is leaving after two years in the top spot. http://www.lloydsbankinggroup.com/
Benjamin Cheng, will retire from the British private equity firm Actis, where he helped invest
in new technology and consumer companies.
Robert E. Grant, the former CEO and president of Bausch & Lomb Surgical and former
president of Botox-maker Allergan Medical, has joined the board of MyoScience, a Redwood
City, CA-based medical device startup. www.myoscience.com
David Williams has joined Dunedin Capital Partners, a UK-based mid-market private equity
house, as a director. www.dunedin.com

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